Table of Contents

Introduction 1

Part I: Getting Started with Risk Management 5

Chapter 1: Living with Risk.7

Chapter 2: Understanding Risk Models 23

Chapter 3: Taking Charge of Risk 41

Chapter 4: Managing Financial Risk 57

Chapter 5: Functions of a Financial Risk Manager 73

Part II: Measuring Financial Risk 85

Chapter 6: Valuing Risk.87

Chapter 7: Stress Testing for Success 109

Chapter 8: Speaking Greek 125

Chapter 9: Accounting for Extremes 145

Part III: Managing Financial Risk 163

Chapter 10: Setting Limits.165

Chapter 11: Stopping Losses 181

Chapter 12: Controlling Drawdowns 199

Chapter 13: Hedging Bets 215

Part IV: Working in Financial Institutions 237

Chapter 14: Trading Places 239

Chapter 15: Banking on Risk 249

Chapter 16: Managing Assets and Portfolios 261

Chapter 17: Insuring Risk 271

Part V: Communicating Risk 283

Chapter 18: Reporting Risk 285

Chapter 19: Regulating Finance 299

Part VI: The Part of Tens 317

Chapter 20: Ten One-Minute Risk Management Tips 319

Chapter 21: Ten Days that Shook the (Financial) World 327

Chapter 22: Ten Great Risk Managers in History 341

Chapter 23: Ten Great Risk Books 349

Index 355

About the Author

Aaron Brown is managing director and risk manager at AQR Capital Management and the 2011 GARP Risk Manager of the Year. He wrote Red-Blooded Risk and The Poker Face of Wall Street. He was named Financial Educator of the Year by the readers of Wilmott Magazine and his website won a Forbes Best of the Web award for Theory and Practice of Investing.

Reviews

Aaron Brown has produced much more than a how-to manual. Few financial books provide so much solid instruction in as lively and provocative fashion. Financial Risk Management for Dummies ranks with the ten great books on risk.

- Martin S. Fridson, CFA, chief investment officer at Lehmann, Livian, Fridson Advisors, LLC, New York City